Stock Variance Calculation

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  After completing the variance calculation, the standard deviation of the stock is calculated.

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  0.005187 Standard Deviation = Square root ( Variance) Standard Deviation = Square root (0.005187) Standard Deviation = 7.2% The solution explains the calculation of expected return and standard deviation of a stock.

• Calculating expected return, variance and variation

  Only one calculation for each type is shown such as variance, standard deviation or covariance. For others, the values are given you can do the calculation and verify. All formulas have been provided.

• Stock Variance

  Calculation of Stock Variance Given: Standard deviation of market index portfolio: (?m) = 20% or 0.2 Beta of stock A: (?) = 1.5 Residual standard deviation of stock A: (?

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  The solution also provides a calculation of the correlation between the two stocks.

• Standard Deviation of a portfolio

  is the variance of stock A. This is (0.5)^2 = 0.25 is the variance of stock B. This is (0.4)^2=0.16 is the coefficient of correlation.

• Calculating the Coefficient of Variation and Standard Deviation

  Step by step calculation sare given.

• Option's Value using Black Scholes Pricing Model

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